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Penalties for late payment of PAYE and NIC

13 November 2019

Penalties for late payment of PAYE and NIC

I keep getting penalties for late payment of VAT and PAYE. The problem is, the more penalties I get, the harder it is to pay!"

In 2010, HMRC implemented new penalties for the late payment of periodic PAYE /NIC from businesses. They included any tax, national insurance contributions, construction industry deductions and student loan deductions which may be due.

It means that businesses delaying payment of the above regularly, may have a penalty to pay if the payments are not made by 19th of the month. The initial penalty is 1% of the tax and will increase in increments to 4%. There will be a 1 month period of "grace", i.e. you will be allowed one late month per tax year.

However, for all tax more than 6 months late, a penalty of 5% applies. If the debt remains due after a further 6 months a further 5% penalty may be applied.

This is similar to the VAT Surcharge regime which starts at 2% after the first default in a 12 month period and rises to 15% of VAT due.

For annual payments such as Class 1A NIC the penalty can be applied up to 3 times. Or 15%.

What if the company is involved in the Business Payment Support Service, which agrees deals with companies for Time to Pay Deals? There will be NO PENALTIES if the deal is stuck to.

Reading the HMRC guide, gives a clue to the way to deal with late payment problems compounded by penalties and interest. Amazingly, you can pay the penalty over a Time to Pay Deal period!

Options and alternatives?, using a company voluntary arrangement (CVA) to delay tax and creditor payments for up to 5 YEARS with no interest and no penalties AND with the ability to discount the debt significantly is surely a better option that Time to Pay Deals that add interest and penalties?

"So, is using a CVA better than seeing the company go bust, close down and every creditor losing their money and an ongoing customer?

CVAs are a powerful tool for rescuing a distressed company when you know it can be profitable in future. You can make employees redundant with no cash cost, you can get out of property leases and problem contracts and make the business profitable again with the CVA and our help.

In the time it takes us to organise the CVA for you, we will freeze your payments to VAT, PAYE and creditors. Then together we offer the creditors a deal over time to pay something back from future profits. Your company pays for new supplies or services as it goes along to the CVA agreement. This improves the cashflow in your business. You manage the company, we manage the CVA process.

"If its so great, why doesn't everyone use the CVA if their business gets into trouble?

The answer is because very few people know about this fantastic tool and most companies end up going into liquidation or administration because directors are scared of insolvency. And most insolvency practitioners don't seem to understand or like CVAs. So why don't people know about CVAs?

Categories: HMRC Time to Pay Arrangement

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